In a surprising turn of events, Donald Trump’s recent decision to pause steep tariffs against most nations has ignited a significant rally in share markets, helping to erase some of the heavy losses experienced over the past week. This development comes amid growing concerns about an escalating trade war between the United States and China, the world’s two largest economies.
On Wednesday, Wall Street experienced a remarkable surge, with the Nasdaq logging its fourth-best day in history. This rally sparked a rebound across Australasian futures markets, leading to a notable recovery in the Nikkei, which reversed mid-week losses of nearly 15% to finish almost 2% higher than its close on Friday. The S&P/ASX 200 closed up 4.5% on Thursday, April 10, 2025, at 7,709 points, adding $100 billion in value to Australian shares.
Despite this positive momentum, analysts warn of potential volatility ahead. Australia’s position, along with those of the UK and New Zealand, remains unchanged as they continue to be subject to the US’s “baseline” 10% tariff. Major miners such as BHP and Rio Tinto led the rally, each seeing their stock prices increase by more than 5%. This surge marked the strongest trading day since 2020, yet investment groups have advised caution, indicating that the unpredictability of US trade policy may have ongoing impacts on investment and trade.
ANZ, a significant player in the financial sector, downgraded its price targets for energy and metal markets—two crucial components of the ASX. In a research note, ANZ highlighted that “the unpredictability of US trade policy is likely to have ongoing impacts on investment and trade, as companies and consumers wait for clarity.” The escalation of trade tensions between the US and China shows no signs of abating, further complicating the economic landscape.
David Bassanese, chief economist at Betashares, echoed these sentiments, warning investors that the global economy “faces enormous risk in the weeks and months ahead.” He cautioned that the recent bounce in the markets could be a “cruel bear market” rally, a temporary increase in share prices in an otherwise declining market. “We’re not out of the woods just yet,” he stated, emphasizing the need for vigilance.
Trump’s decision to pause tariffs came shortly after investors demonstrated clear signs of market ruptures, selling off US government bonds—historically considered one of the safest financial assets. When asked why he ordered the pause, Trump remarked, “People were jumping a little bit out of line. They were getting yippy.” While traders celebrated the tariff reversal, the effects on certain market sectors remained unchanged.
It is important to note that the 25% levy on steel and aluminum imports to the US is still in effect, and Trump has indicated plans to introduce a “major” tariff on all pharmaceutical imports. This ongoing uncertainty continues to loom over the markets, with many investors closely monitoring developments.
Meanwhile, the Australian dollar showed signs of recovery, rising to US61.8 cents late on Thursday after threatening to plunge below the 59-cent barrier earlier in the week. This recovery reflects the broader positive sentiment in the markets, although concerns about the long-term implications of US-China trade relations persist.
As the Hang Seng index also staged a solid rebound from support levels, it rallied from the 2024 trendline and now trades back above both its 50- and 200-day simple moving averages (SMAs). The index managed to close above the 20,000 handle, with traders eyeing the 21,000 level near the 61.8% Fibonacci retracement. However, similar to the ASX, daily volumes are declining as prices rise, suggesting that the recent gains may be driven more by short covering than by fresh bullish conviction.
Overall, the recent developments in the financial markets highlight the intricate interplay between global trade policies and local economic conditions. Investors are left to navigate the complexities of a market that is both buoyed by temporary gains and weighed down by the uncertainty of future trade relations.
In summary, while the pause on tariffs has provided a much-needed boost to the markets, the underlying issues associated with US-China trade tensions remain unresolved. As analysts and investors closely monitor the situation, the potential for further volatility looms large, and the path forward remains uncertain.
